Saturday, March 04, 2006

John Armstrong: One more gaffe and he's out

Why is she keeping him? What makes David Benson-Pope so different from other ministers given the heave-ho by Helen Clark? Why has the Prime Minister risked damaging her own credibility by refusing to dump him from the Cabinet?

And, perhaps, the biggest question of all: does his survival indicate the bar has been lowered in terms of acceptable behaviour by ministers?

With every twist and turn of the David Benson-Pope saga, the first three questions have begged an answer all week. There is no single, simple answer. He survives for a number of reasons.

The most obvious is that there has not been sufficient groundswell outside Parliament to force the Prime Minister's hand. The story has not dominated front pages or remained perched atop news bulletins. That has given sustenance to those in the Beehive who argue Labour can get away with not sacking him.

Parliament may be fixated with Benson-Pope. The rest of the country isn't. Where people do have an opinion, it is divided. There is a strong feeling he has not done anything terribly wrong and is the victim of a witch-hunt. Many of those holding this view are those red-blooded, male Labour voters who found John Tamihere so appealing.

Clark has acknowledged this sentiment by determining that Benson-Pope's alleged misdemeanours as a teacher - such as "barking from the doorway" of girls' changing rooms - simply do not warrant a sacking.

However, part of Clark's reluctance to dump him springs from worries it would be open season on other former teachers and university lecturers in Labour's caucus. The message to National and Act is "you are wasting your time".

Benson-Pope's cause has been assisted by there being two major elements in this saga - whether he behaved appropriately as a teacher and, whether, he has behaved appropriately as a minister.

The interested public is not surprisingly focusing on the former, given the lurid impressions that come to mind from the allegations that Benson-Pope burst into female dormitories and showers.

He is comfortable disputing those allegations - and it is puzzling why he waited four days before fronting up and doing so.

He is far less comfortable when it comes to defending the way he has handled all the various allegations of pupil abuse from last May onwards - which is presumably why the media silence was maintained for so long.

However, his mishandling of the allegations - the changing stories, the elastic denials - is a complicated tale and difficult for people to get a handle on. He has been caught out big-time in having misled the public. But the public is not too focused on that.

That has made it easier for Labour to hang on to him. The Prime Minister determined that his errors of judgment were not sufficient to justify his dismissal. She stressed that was her judgment. If so, it was a political judgment made easier by the absence of any wave of anger demanding his dismissal.

It is also something of a fallacy that Benson-Pope is being treated more favourably than some colleagues who were shown the door post-haste.

Clark tried to hang on to Lianne Dalziel for as long as possible. The party agonised over Tamihere for months. True, he was immediately stood down from the Cabinet while his tax records were investigated. But he was not so much sacked as not reinstated.

Benson-Pope has already had one enforced stand-down and subsequent reinstatement. But Clark could not keep doing that. This time she had to back him or sack him.

Her strategy has been to sort of back him and sort of punish him to appease those calling for him to be dumped and take the sting out of Opposition attacks.

It is a bit like the form of torture where the prisoner's head is plunged into a bucket, held under and then pulled out again so he can catch his breath.

Benson-Pope has been forced to apologise one day, suffered a rebuke from his leader the next and then required to front up to the media the following day with Clark's chief press secretary sitting in on the interviews.

The takeover of his office by the Prime Minister's staff is humiliating stuff - and designed to be so. It is effectively telling him how abysmally he has handled things.

It is also a reminder that he is now very much on notice. Clark is furious with Benson-Pope. The next time he makes a serious mistake, he is gone. The parliamentary rumour mill has him being replaced once the current fuss dies down. It is difficult to see him retaining the Social Development portfolio in Clark's mid-term reshuffle in 18 months or so.

However, he survives for now in large part because Labour is not of a mood to give National a ministerial scalp - especially if there is no real public pressure to do so.

He survives because Labour is feeling the pressure in other ways. It is easier to make examples of ministers when your opponents are in the doldrums and you have a double-digit lead in the polls.

But Labour now no longer so easily dominates Parliament as it did in its first two terms.

Now on more equal footing, the two major parties have literally locked horns in ugly fashion. The hounding of Benson-Pope has a lot to with National striving to show who is really in control of Parliament.

While keeping Benson-Pope might seem myopic, saving him had become a point of honour for Labour inside Parliament even if it appeared counter-productive outside.

Benson-Pope has also been helped by having allies in high places, having inherited his Dunedin South seat from Michael Cullen, who is now a list MP.

That makes it more difficult for Clark to move against Benson-Pope.

Her other constraint is the lurking fear of a byelection. While it is most unlikely Benson-Pope would put his party to such trouble, a byelection in a safe seat like Dunedin South would be a nightmare for Labour. National would not be expected to win - so the pressure would be on Labour to hold the seat by a reasonable majority.

If Labour somehow lost the seat, the Government's majority would go with it. It would become hideously difficult to forge majorities on legislation as Labour would need the backing of NZ First and United Future plus either the Greens or the Maori Party to get bills through Parliament.

We are nowhere near that. But such considerations are always in the back of a prime minister's mind. And that means she has to live with a minister drowning in a moral quicksand of his own making.

Fran O'Sullivan: Minister's crucifixion an ugly spectacle

FAT. Twitchy. Sweaty. Breathless. Sad. Destroyed. David Benson-Pope now has the appearance of a man who might well suffer a myocardial infarction on nationwide television if he once again has to face down a sustained Opposition attack in Parliament's Question Time.

The destruction of the hapless Cabinet minister - over three days of concerted political bullying - is a shocking travesty of natural justice.

It is ugly stuff - reminiscent of a Soviet show trial.

Hearsay trotted out months after a police investigation into Benson-Pope's behaviour was presented as new allegations.

But most of the scuttlebutt was in the 1000- page report the police released last year with the decision not to pursue criminal charges against Benson-Pope for allegedly stuffing a tennis ball in a pupil's mouth.

The fact is that no one bothered to pounce on the details in the report until Investigate magazine decided to put new icing on an old cake by running the allegations, unattributed at that time, that Benson-Pope burst into the girls' shower room at a school camp.

That National jumped into the fray should not surprise.

Its front bench - determined to protect their own political butts against the 23 newcomers, mostly talented, on its side - knows it needs to ratchet up some political scalps of its own.

It also knows Prime Minister Helen Clark's predilection for rolling out the political tumbril herself when any of her ministers falls over.

But the Opposition also needs to demonstrate itself as surging in debate and focused where it matters: on the real issues that face this country.

It must not take leave of its collective senses in an effort to compete against New Zealand's blogosphere in the demolition game against one minister by firing parliamentary allegations - which are unfounded on the so-called evidence presented in this week's McCarthyist attack - that Benson-Pope is a "pervert".

Judith Collins - a lawyer herself - lost all sense of proportion when she fired that particular allegation across the House.

Try that in front of a real Court of Justice - instead of within our very own parliamentary Star Chamber - and see what short shrift you would get from a High Court judge for your prosecutory efforts.

What is lacking in this affair is real corroboratory evidence.

Neither Collins nor Bill English - who at least examined the systemic issues involved - could back up that particular sally.

Some former pupils of Bayfield High have since come forward to say there was no way the ex-teacher would have seen them in a state of undress.

At the very least somebody - anybody - please present a line-of-sight diagram to show if it was even physically possible in the first place.

I find it astonishing that National leader Don Brash - one of a big swag of New Zealand notables who signed a petition for an inquiry into the Peter Ellis affair - should put his name to such an inquisition.

Brash, after all - and a number of notable editors - thought the allegations that a Christchurch creche was basically a paedophile cesspit verged on the Salem witch trial hysteria.

Like Ellis, Benson-Pope is physically unattractive. If he looked anything like the handsome male teacher from my own school days who, shortly after everybody packed off to university, set up shop with an attractive former pupil, I suspect the furore would have been much less frenzied.

There is an issue also over whether Brash himself could have withstood such personal scrutiny through a hindsight mirror.

Would a board of directors today be quite so tolerant of a managing director who decided to have a fling with a subordinate, leading to the destruction of both their marriages?

I personally think it's their own business.

But some boards wouldn't.

Do we really want our Parliament - and our news media, for that matter - to descend into a British-style of public life where people of substance will not put themselves forward for politics for fear that even the most minor skeletons in their cage will be publicly rattled?

It may sell newspapers and make for compulsive television viewing but it is destructive.

While National was plumbing the political depths it was not turning its attention to the issues that matter: our declining trade figures, the Government's attempt to turn around business confidence without implementing the policies that will really help - the new savings scheme, the blowout in the Auckland roading situation, the crumbling power system.

All of these are issues that matter.

We all know Clark's decision to stand by Benson-Pope is born of expediency and self-regard for political longevity - her own.

Her "take no prisoners" style is well known.

But she had no difficulty, and neither did some National MPs, rubbing shoulders in Auckland with former United States President Bill Clinton, whose own proven sexual transgressions have long been swept behind him.

There will be enormous hurdles, of course, if Clark does allow Benson-Pope the chance to rebuild his credibility as a Cabinet minister.

But National demeans itself by making him the target of impeachment games. He's just not worth it.

Editorial: Let's hope Cup Week catches on

Some hardy souls will be recovering right now from last night's races at Alexandra Park and be preparing to spend today at Ellerslie.

They may have arranged leave from work all next week to ensure they make it back to Alexandra Park on Tuesday, then Ellerslie again on Wednesday for the Auckland Cup. And next weekend, if they are still upright and solvent, they hope to do it all again.

This is "Cup Week", a social whirl well known in Christchurch but new to Auckland. If the racing clubs' dreams are realised, this will become a red-letter day on the Auckland calendar, the beginning of an 8-day carnival every year in the first full week of March. They have moved the Mercedes Derby from Boxing Day to make it the feature event at Ellerslie this afternoon, the Auckland Cup has forsaken New Year's Day to see if it can be a midweek drawcard like the Melbourne Cup and the New Zealand Trotting Cup in Christchurch.

Many Auckland business owners will hope a Cup Week catches on here. It is practically impossible to find an empty hotel room or restaurant table in Christchurch during the second week of November. The race-goers spend not only on the horses but on themselves, lavishly.

It is a week to indulge in high dressing, cocktail breakfasts, salubrious afternoons and safe taxi rides.

Racing needs it, but the city needs it too. Since the loss of the America's Cup and the city council's failure to embrace the V8 street race, Auckland has been in need of a big party. This could be it. Ellerslie and Alexandra Park are fine venues and horses have an appeal to far more people than those who follow their racing form.

There is no better catalyst for getting together with good friends than a day at the races - unless it is several days at the races. Those who really want to make a week of it can include dog racing too, at Manukau on Sunday, Thursday and next Sunday.

It will take a year or two, or three, to establish Cup Week in the Auckland consciousness. The Auckland Racing Club says it has no idea what numbers to expect this week; much will depend on the late summer weather. With temperatures cooling now, particularly in the evenings, the organisers might wonder whether March is a little late for the carnival. They have put all their big eggs in this basket and need to get it right.

Getting it right, the organisers frankly admit, means attracting women. Racing can probably survive but not prosper on its serious, betting, largely male following. To increase its public and corporate appeal, which translates into the higher stakes and revenue to support the bloodstock industry, the clubs need to see that their occasions are more like a visit to the Viaduct than a seedy public bar on a Saturday afternoon.

Racing is now well accustomed to competition from lotteries and casinos for its share of New Zealanders' gambling cash, and racing is beginning to win. The amount spent on gambling overall fell last year, probably from the impact of anti-smoking law on bars and casinos, but racing and sports betting bucked the trend. Both the big cups of the coming week - the Auckland Cup and the Auckland Trotting Cup - have attracted increased stake money this year, ironically with the backing of Sky City casino, which makes perfect sense.

The casino, like every other leisure business in Auckland, stands to gain if Cup Week can be established. But those who have most to gain are the Aucklanders and visitors who have forgotten how to have a real dressed-up day at the races and hardly know yet what they will do with a week of it. It will be fun to find out.

Paul Thomas: The titillating world of sex and schoolmasters

On opening the local newspaper last weekend I found myself described as "a writer whose fiction has regularly explored sexual ethics".

Something to ponder over the grapefruit and Vogel's, I think you'll agree. Various questions sprang to mind: What, exactly, does this mean? How did it come to this? Are there any sexual ethics left to explore?

But if the cap fits, wear it. I can't deny that the games people play crop up quite a lot in my work and I devoted an entire volume of short stories to the tangles people can get themselves into when they think with the little head, as they say in America.

I'm in good company. It's been said that there are only two worthwhile themes: sex and death. And at the low-brow end of the scale, a Hollywood producer renowned for his unblinking focus on the bottom-line once declared that there was really only one story: the delayed act of intimacy.

I must stress, though, that my approach has been predominantly comic and satiric rather than titillating, although there's so much bizarre stuff happening in the real world that I sometimes wonder why I bother making it up.

Consider the following which I came across while randomly browsing the net:

* An Argentinian couple have been arrested for having sex opposite a mayor's office in broad daylight. When police officers arrived they demanded to be allowed to finish what they were doing. The woman said she'd always fantasised about having sex outside a mayor's office while politicians were working inside.

* A Sudanese man caught having sex with a goat has been forced to marry the animal. "I heard the goat make a loud noise," said the owner, "and rushed outside to find Mr Tombe naked and engaged in a relationship with my goat." Rather than involve the police, he made Mr Tombe cough up a $125 dowry. At last report man and beast were still a couple.

* A Vietnamese man who took a fake Chinese-made Viagra tablet had to be hospitalised when his erection refused to quit after 48 hours. (As an aside, you have to wonder why the report described the tablet as "fake" since it would seem to have been effective.)

* A Coopers Beach GP plans to convert his medical centre into a high-class brothel. "It's not a big leap, really," said Neil Benson who claimed his brothel would provide a private service and maintain confidentiality, just as his medical practice did. The Chairman of the New Zealand Medical Association's GP Panel was quoted as saying the change of business proved that medicine isn't the big earner people think it is.

* Sharka, a two-tonne white rhinoceros at a West Midlands safari park, tried to have sex with a Renault Laguna. A spokesperson for the park observed that rhinos aren't particularly intelligent animals.

* Two gay lovers climbed a larch tree in New York's Central Park and spent four hours engaging in sex acts and hurling abuse at police and fire-fighters. During the stand-off, one of them spurned a police officer's offer of a can of Coke, yelling "I wanted vanilla Diet Pepsi."

* Seven paratroopers from the United States Army's elite 82nd Airborne Division have been charged with being paid to have filmed sex for a gay pornographic website. The 82nd Airborne, who have featured prominently in every major campaign going back to World War I, are known as the "All-Americans."

The comic effect of that last item is enhanced by the macho posturing that surrounds the US military and the chest-thumping which US military-might inspires among politicians and the public alike.

How, one wonders, did those Americans who derided the French as "cheese-eating surrender monkeys" for their opposition to the invasion of Iraq react to the news that some of their crack troops are moonlighting as gay porn stars?

Mind you, I've had my doubts about the American military ever since the Clint Eastwood movie Heartbreak Ridge which portrayed the 1983 US invasion of Grenada as a feat of arms comparable to D-Day. In case this epic clash has slipped your mind, Grenada is a 344sq km Caribbean Island with a total population of less than 90,000.

What made Heartbreak Ridge even more ludicrous was its explicit message that conquering Grenada exorcised the ghosts of Korea and Vietnam where the American fighting man was prevented from prevailing by gutless politicians and bleeding-heart liberals.

Meanwhile, back at the sex-humour crossroads, we await the next instalment in When Schoolmasters Go Wild: The Saga of David Benson-Pope.

Whether Benson-Pope's a pervert, as alleged by Act's Rodney Hide, or over-zealous, or simply has a Mr Magoo-like propensity for getting his wires crossed and blundering through the wrong door remains to be seen, but I suppose many of us could dredge up instances of schoolteacher conduct that wouldn't bear scrutiny several decades down the track.

As a nipper I attended a prep school in Christchurch where we were obliged to swim in the nude (except on sports day) and, now that I think of it, there sometimes seemed to be more staff members in attendance than were strictly necessary.

John Roughan: An acute sense of belonging

Auckland University farewelled a professor of political philosophy this week who has been a hidden national treasure. Political philosophy sounds like a dusty subject unless you were lucky enough to have heard the lectures of Andrew Sharp.

He was that rare academic, a first-class thinker who could teach. He didn't so much lecture as think aloud. When he introduced you to philosophers through the ages he became them. He would extemporise on the theories of Aristotle, Aquinas, Hobbes, Locke and the rest, with scarcely a note in front of him.

His lectures regularly attracted more students than were actually taking his course, possibly because he was immensely good looking but more likely because he used clear, vivid language to apply the great minds of history to timeless questions of rights and justice, freedom, fairness and good order.

He had the endearing habit of taking a wrong turning sometimes. When he realised his reasoning had strayed from the track of the philosopher he was representing, he'd stop, wind our minds back and pick up the trail.

After his 35 years at Auckland, and before that at Canterbury, many thousands of students of politics must know what I am talking about. Some of them have been in recent governments.

He would disclaim much influence on their thinking, and his own writing on national issues, notably Treaty justice, has been aimed at academic audiences.

But those thousands will be as grateful as me for the minds he opened to us and for helping us to think.

I would like to hear from Andrew Sharp on one point before I fill out the census on Tuesday night. Its most difficult question asks, "Which ethnic group do you belong to?" and lists a number of possibilities, inviting us to mark one or more.

The only listed category that remotely applies to me is "New Zealand European", and that is remote. It is four generations back.

When in Europe I have never felt I belong in any part of it, even Ireland where those roots of those four generations lie.

I went looking for them once, in County Clare where our family name is common. In the town of Ennis I even found a shopfront proclaiming, "John Roughan, Hardware".

Bowling up to the proprietor, I thrust out my hand and greeted him as a long-lost relative from the colonies.

He turned a dark eye on me for a moment then decided it was best to pretend I wasn't there.

Fair enough, too.

So what ethnic group do I belong to? A widely circulating email is urging people like me to use the space provided in the census for people to an unlisted ethnic group and there I should write in "New Zealander".

The anonymous author believes that if enough of us take the write-in option, "then maybe, just maybe, we can get the powers that be to sit up and recognise that we are proud of who we are and that we want to be recognised as such, not divided into sub-categories and all treated as foreigners in our own country".

The force of this appeal is causing consternation among social scientists whose livelihood depends on putting the population into categories, particularly ethnic categories, and who rely on census data for almost their entire knowledge of humankind.

A plea on their behalf has been issued by an organisation called the Population Association of New Zealand which says the census question was not intended as a test of commitment to New Zealand or as an inquiry about nationality.

"If it is taken as a test of national commitment, and if we assume that everyone who is either a citizen or a permanent resident could consider themselves a 'New Zealander' then we might have as many as 90 per cent of the usual population giving this response."

That, they say, is unlikely, "but even if a significant, though unknown, proportion of each group opted for this, the resulting data would be difficult to use".

It would take a political philosopher to untangle people's concepts of ethnicity and nationality, and the conclusion, I suspect, would be that the distinction is not as clear as social data-users would like to believe.

People don't think of themselves as "ethnic", they speak of their nationality. Even in social science, "ethnicity" has a meaning much broader than most people think. It embraces heritage, culture, kinship, religion and all the things that cause people to feel a greater affinity to some than to others in the same state.

The ethnic majority, which naturally dominates a democratic state, is not encouraged to feel a greater affinity for its own and typically responds by insisting that all ethnic allegiances be submerged in the majority's "nation". But it confuses nationality with patriotism.

Nationality is more like ethnicity, I think. It is the identity I feel most strongly in places such as London, and it is not European; quite the opposite. It is an acute sense that I come from a different place.

It wouldn't matter how long I lived there, how fond of the place I became or even if it became convenient to change my passport. It would not change what I know myself to be.

New Zealanders who spend a lifetime in Australia and never want to come home, nevertheless seldom change their citizenship.

It will be the same for immigrants here. Few people ever turn their back entirely on their origins. Officially they may change their nationality but they do not cease to be what they were born.

In a spirit of inclusiveness, the census writers refer, for example, to "Chinese New Zealanders". But the immigrants call themselves New Zealand Chinese.

The nationality of a minority is seldom a problem if there is a place in the world where their identity is strong and secure.

The census question is politically loaded only because there is more than one nationality that has its identity here.

It seems to me there are now three indigenous national conceptions in this country: Maori, who were first here and remember nowhere else, New Zealanders who recognise no other nation within, and New Zealanders who draw distinctive national sustenance from the Treaty of Waitangi.

So go ahead and write in New Zealander if you wish. I will.

Graham Reid: Stones - you make a grown man cry

The programme from the 1966 tour, from the writer's collection.

If memory serves me still, it was schoolmate Chris Gilbert and I who went to see the Stones together at Auckland's Civic Theatre on March 1, 1966.

I know I wore a black polo-necked sweater (of the kind that Stones Brian Jones and Keith Richard favoured), and that the show, while not actually changing my life, had a profound and not entirely favourable effect on me.

Even as a spotty schoolboy I went to plenty of concerts - but Aussie pop singer Normie Rowe with the Chicks and a few others at the Crystal Palace, or the Yardbirds with the Walker Brothers and Roy Orbison at the Town Hall didn't compare with the full-throated noise at the Stones.

And that was just from the girl beside me, who - in an astonishing outpouring of affection and sudden hormonal imbalance - started screaming the second they were announced. I may have screamed also.

There is a common belief - by those who want to appear cooler as kids than they actually were - that at school in the '60s you were either a Beatles or a Stones fan.

But everyone I knew loved them both - and Paul Revere and the Raiders, the Downliners Sect, the Pretty Things, the Dave Clark Five and so on.

But the Stones possessed a special something. The day I bought, shoplifted actually, their single The Last Time with its naggingly repetitive guitar line I found it. After five consecutive plays on the gramophone, my mum - who liked the Beatles and thought the Kinks and the Who were okay - told me to take it off.

This was a major adolescent discovery: the Stones made ideal parent-baiting music. Which made me play them all the more.

The Stones were also loud.

But when I heard It's All Over Now with its chiming guitar on the chorus, it was like a thunderclap. I bought their album The Unstoppable Stones (35/6d) and played it until I knew every flick on Charlie Watts' cymbals and every click of surface noise between the tracks.

And so, 40 years ago, I put on my polo-necked sweater and Beatle boots and went to see the Stones. They looked fantastic - like the Checks, but older - and back then blond Brian Jones was the main man after Mick Jagger. Keith Richard (as his name was then spelled) was just that guy over there, and I don't remember bassist Bill Wyman.

It was a brilliant night - The Searchers opened and they'd had some good songs - and the Stones played The Last Time, sneered through Not Fade Away, and did Satisfaction, Get Off My Cloud and 19th Nervous Breakdown while the girl next to me went into hysterics. They also did Play With Fire which revealed their sensitive side.

To hell with that though, we preferred 'em loud.

My love affair with their raw sound had begun back in mid '64 which made me a diehard fan by early '66 - and down the decades since I bought their albums, even when I was broke. And while they offered diminishing returns from the '80s I'd always give them the benefit of the doubt.

They've cost me a fortune in EPs and LPs, the odd box set and then CDs. I'm the man who bought Mick his home in the Bahamas.

I also saw them whenever I could: the dissolute stadium rockers who came here in '73; the pompous Voodoo Lounge tour in both Melbourne and Auckland in early 95; and then in late 2002 when they delivered a stunning show in their natural hometown of Chicago, the city of tough urban blues and Chess Studios where they recorded It's All Over Now back at the dawn of time.

After the show my friend Karen took me down to Chess at 2120 South Michigan Avenue and, somewhat pathetically, I waited around there until well after midnight - just in the hope they might pop by for a post-show session. Whadda sad bastard. While I stood in the winter wind they were back at the hotel talking to accountants.

I met Mick Jagger when he came to play the Gluepot on that solo tour in 88. He said to me, and this is absolutely true, "Graham, we're real tight."

That's another, and even more stupid, story.

However, in a strange but very distant way, we have been for more than 40 years.

I wonder what happened to Chris Gilbert - and if he's going to the Springs.

Brian Gaynor: Mysterious art of number crunching

The controversial Calan Healthcare Properties Trust independent appraisal report has reignited debate over listed property valuations.

Why is there so much controversy on the issue and what is the most appropriate valuation method?

As the accompanying box demonstrates, there are four widely recognised valuation methods: Net tangible assets (NTA), discounted cashflow (DCF), capitalisation of earnings and dividend yields.

The NTA method is the most widely used in Australia.

When Trans Tasman Properties made a takeover offer for Australian Growth Properties in 2003, Grant Samuel was appointed the independent adviser. It assessed the different valuation methods and concluded that the NTA method was the most appropriate.

Listed Australian office trusts were trading at a 3 per cent premium to NTA at the time, and 2002 and 2003 takeover offers had an average NTA premium of 14 per cent.

Grant Samuel concluded that Trans Tasman Properties' 85Ac a share offer was not fair because the target company had an NTA of A$1.01.

When Macquarie Office Management made a takeover offer for Principal America Office Trust in 2004, Deloitte was appointed independent adviser. It determined NTA was the most appropriate method because the trust was an asset-holding business.

The Deloitte report concluded that the four Australian-listed trusts with US assets were trading at a 20.1 per cent premium to NTA while the five Australian-orientated office trusts were at a 3.1 per cent premium to NTA.

The Deloitte analysis showed that five listed Australian trusts were successfully acquired in 2003 at NTA premiums ranging from just 2.2 per cent to 27 per cent. The average was 15.4 per cent.

Deloitte determined that the fair value for Principal America Office Trust was a 10 per cent to 20 per cent premium to NTA. As Macquarie was offering a 25.5 per cent premium to NTA, the independent adviser concluded the offer was fair.

Deloitte also prepared the valuation report when Multiplex bid for Ronin Property Group in 2004 (this is how Multiplex ended up with a 27.7 per cent AMP NZ Office Trust stake, a large proportion of which was sold this week). NTA was used to determine whether Ronin's offer was fair.

Deloitte concluded that the control premium over NTA for Ronin should be in the 10 to 15 per cent range (the shares were trading at a 6 per cent premium to NTA before the offer).

As the consideration being offered, which included a scrip component, represented 15 to 19 per cent above Ronin's NTA, the offer was considered to be fair by Deloitte.

The conclusion from these and other independent appraisal reports in Australia is that the NTA method is the best way to assess the value of listed property entities because they are asset-based organisations.

When Kiwi Income Properties Trust made an offer for Kiwi Development Trust in 2001, the PricewaterhouseCoopers' independent appraisal report valued the target company by the NTA method. This was cross-checked by the DCF process.

The independent adviser determined that the target trust's NTA was between $2.44 and $2.65 a unit but the DCF valuation was only $1.72 to $2.31 a unit. This reinforced PricewaterhouseCoopers' view that NTA was the best way to value Kiwi Development Trust.

PWC considered the offer to be fair as the NTA of the target trust was between $2.44 and $2.65 a unit and the bid, which was a scrip offer, was worth between $2.60 and $2.75 a unit.

When AMP made a $1.42 a share offer for Capital Properties last year, raised to $1.48 a share, Deloitte was appointed as independent adviser.

Deloitte decided that DCF was the most appropriate valuation method with NTA used as a cross-check.

It is difficult to know why Deloitte used the DCF method as most investors, whether in residential, commercial, retail or industrial property, put a greater emphasis on capital values over income.

Deloitte estimated that the DCF valuation of Capital Properties was between $1.48 and $1.73 a share and the NTA value at $1.44. The independent adviser noted that the $1.44 NTA valuation did not recognise the potential for growth or include a premium for control.

As most successful listed NZ property vehicles are trading in excess of NTA, it is reasonable to assume that Capital Properties' shares were worth at least $1.58 when a control premium is included. This is 10 per cent above Deloitte's NTA valuation.

Shareholders didn't agree with this assessment, and AMP reached its 90 per cent target this week and is moving to compulsory acquisition.

Ferrier Hodgson, the independent adviser to the Calan Healthcare Properties Trust offer, used the DCF method with NTA as a backup.

Its DCF valuation of Calan is $1.41 to $1.55 a unit and $1.26 on a NTA basis, excluding any premium for control. These compare with the estimated cash equivalent value of ING's offer of $1.21 per Calan unit.

Ferrier Hodgson noted the average NTA premium of the listed property sector, excluding Capital Properties, was 9.4 per cent at February 14.

The Calan independent appraisal is disappointing because it over-emphasised the DCF method and offers little new information. One of its biggest flaws is the absence of analysis of the healthcare property market or comparisons with property values in this sector in other parts of the world.

Ferrier Hodgson prepared the June 2005 Oyster Bay Marlborough Vineyards appraisal report that was subject to a Takeovers Panel inquiry.

The Oyster Bay report used DCF, which was between $2.39 and $3.15 a share, as the primary valuation and NTA, which came to $3.26, as the back- up (the latter was effectively a DCF valuation because it was based on an income-based valuation by property valuers Logan Stone).

In short, Delegat's had to make a new offer because the panel decided that the Ferrier Hodgson report did not put enough emphasis on the market value of the land (NTA).

The second independent adviser's report, which was prepared by Grant Samuel, used the capitalisation of earnings method because Oyster Bay's land is encumbered. This method produced a valuation of between $3.96 and $4.67 an Oyster Bay share whereas the backup DCF valuation was $4.09.

These different valuations methods are confusing and subjective. The DCF method is particularly subjective because the independent adviser has almost complete control over the valuation process, whereas property experts have a major input into NTA.

This input is important because property valuers should know a great deal more about this asset class than general corporate advisers.

With this in mind the most appropriate base valuation for Calan Healthcare Properties Trust is NTA, which is $1.26 a unit. Unfortunately, the Ferrier Hodgson report doesn't give us any indication whether the premium for control should be 10, 15 or 20 per cent above this figure.

Disclosure of interest: Brian Gaynor is an investment strategist and analyst at Milford Asset Management.


Property valuation methods

* Net tangible assets (NTA) method
* This method estimates the value of an entity based on the realisable value of its net assets.
* Discounted cashflow (DCF) method
* The value is estimated by discounting an entity's future cashflows to a net present value.
* Capitalisation of earnings method
* Earnings or cashflow are capitalised at a multiple that reflects the risk and stability of a business.
* Dividend yield method
* The value is estimated by comparing the dividend yield to other listed property entities.